DALLAS -- The board of managers of Drive Financial Services announced that Banco Santander Central Hispano has entered into an agreement with HBOS and selected members of Drive management to acquire a 90 percent ownership stake in the company. Despite this, sources inside Drive said business will continue as usual.

"The sale represents a logical move for HBOS -- both financially and strategically," said Bill Hendry, managing director of HBOS in North America and chairman of Drive.

Allan Garraway, chief executive officer of Drive Financial Services, added, "Transferring ownership of Drive to a multinational financial institution with an international focus in auto finance is the right move to continue the phenomenal success story."

Santander said it expects Drive to expand its existing auto lending franchise and increase its presence in North America.

"This transaction represents a qualitative leap for Santander Consumer Finance," said Juan Rodriguez, head of Santander Consumer Finance. "Drive is the niche business leader in a business in which Santander has a solid record of success in Europe, which we will aim to repeat in the U.S., the world's largest market.

"We believe Drive is exceedingly well-positioned for growth and has excellent servicing and asset-quality control platforms," he continued.

Thomas Dundon, currently Drive's president and chief operating officer, will retain 10 percent ownership and has agreed to a long-term contract to become the company's new chief executive officer. Santander is acquiring the stakes of HBOS (64.5 percent) and the majority of the company's management stake in Drive, excluding Dundon.

"Drive believes we have found the ideal partner to support our continued evolution into one of the most successful auto finance companies in the country," Dundon said.

As usual, completion of the transaction is subject to regulatory approval, which is projected to take place before the end of this year.

The transaction is valued at $651 million, and Santander anticipates the acquisition will contribute 1.5 percent to its 2007 earnings per share. The bank said the agreed price was 6.9 times 2006 estimated earnings for Drive. Moreover, executives said the acquisition is expected to generate $540 million in goodwill.

Additionally, Santander said the parties have signed a series of options which could enable Grupo Santander to buy the additional 10 percent remaining share in Drive between 2009 and 2013 at prices related to the company's earnings performance.

Executives went on to say the price Santander could pay for the acquisition may increase by a maximum of $175 million if Drive achieves certain earnings targets set for 2007 and 2008.

As of August, Santander said Drive's financial assets came in at approximately $2.53 billion, and its loan porfolio was $2.4 billion. The company has approximately 600 employees, and its products are distributed through more than 10,000 dealer partnerships.

Santander Consumer Finance is one of Grupo Santander's core businesses. The bank's profits rose 22 percent in the first half of the year over the prior year, according to executives.

The company manages a loan portfolio of EUR 34,477 million and deposits worth EUR 14,197 million. Before the Drive acquisition, the financial institution was focused on 13 European countries, in particular, Spain, Germany, Italy and Poland. Santander Consumer Finance said it has 5,304 employees and 278 branches.